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LIVESTOCK MARKETS: U.S. broiler production forecast reduced

The U.S. Department of Agriculture recently lowered its estimated broiler production for the third quarter of 2016 by 100 million lb. due to lower-than-expected weekly production in September. If realized, this would be the first year-over-year decline for any quarter since 2012.

The average broiler weight at slaughter in August experienced a counter-seasonal decline as quality concerns associated with “woody breast” likely limited bird weights (Figure), according to USDA's “Livestock, Dairy & Poultry Outlook” report. Broiler hatcheries have been increasing the number of broiler chicks hatched, but this is not expected to compensate for the effect of lower-than-expected weights.

Whole-broiler prices (national composite) started October weaker than last year and were below 71 cents/lb. for the week ending Oct. 7. This contributed to a reduction of the fourth-quarter price forecast to 74-78 cents/lb., while the 2017 price forecast was lowered to 78-85 cents/lb. USDA said these broiler prices are expected to weaken producer margins in late 2016 and early 2017 and to limit production growth. The forecast for fourth-quarter production was reduced by 60 million lb., and the 2017 forecast was reduced by 355 million lb..

Broiler exports in August reached their highest level since March 2015. USDA said increased exports contributed to lower month-ending stocks of broiler meat for August, which were down 52 million lb. from July.

As reported in the USDA Foreign Agricultural Service's “Livestock & Poultry: World Markets & Trade,” global broiler production is expected to increase 1% to 90.4 million tons in 2017. The report said increases in production from the U.S., Brazil, India and the European Union have offset declines in production from China.

Exports by major traders are projected to be up 5% to 11.4 million tons. Shipments from the top two suppliers — Brazil and the U.S. — are expected to grow, but more so from Brazil due to its access to the Chinese market and the weaker Brazilian currency, the real.

Turkey production remains strong

Turkey production through August continued to be strong, reaching the highest level for the month since 2008 on a per-day basis, the outlook reported.

Although live bird weights reached a record level for August, they were only marginally higher than 2014, and per-day slaughter was a more significant factor in driving production growth. The August placement of poults for growout also reached the highest level since 2008.

USDA said whole-hen prices remain well above the trend prior to the avian influenza outbreak in 2015, while week-to-week prices have been up and down. Hen stocks in cold storage as of Aug. 31 were down 13% from a year earlier; however, stocks of whole toms in cold storage were 9% higher. USDA lowered the fourth-quarter forecast for hen prices to 120-124 cents/lb.

Turkey exports in August attained their highest level since December 2014. Higher future exports would likely reduce the stocks of non-whole-bird turkey meat in cold storage, which were 33% above last year as of Aug. 31. Increased exports could also boost prices for dark meat, such as tom drumsticks, thighs and wings — items that were at multiyear lows as of August.

The latest USDA “Turkey Hatchery” report showed that eggs in incubators in the U.S. totaled 28.4 million on Oct. 1, 2016, up 17% from the same period in 2015 but down 2% from the Sept. 1 total of 28.9 million eggs.

Turkey poults hatched during September 2016 totaled 23.6 million, 21% higher than September 2015 but 3% lower than August's total of 24.2 million poults hatched.

There were 22.2 million net poults placed during September 2016, up 16% from the number placed during the same month last year but 6% lower than the August 2016 total of 23.5 million.

Pork cutout values were mostly lower this week. The wholesale pork cutout was lower at $72.52/cwt. Loins were lower at $74.23/cwt., while hams were higher at $55.33/cwt. Bellies were lower at $109.95/cwt.

Hogs delivered to the western Corn Belt were lower this week, closing at $46.51/cwt. on Thursday.

In the poultry markets, the Georgia dock was unchanged Wednesday at $1.10/lb. Breast meat was lower at $1.51/lb., while leg quarters were unchanged at 31 cents/lb. Wings were also unchanged at $1.535/lb.

According to USDA, egg prices have been steady, with a steady to higher undertone. Offerings have been light to moderate, and supplies have been moderate in most areas to heavy at times in California. Demand has been moderate to fairly good.

Large eggs delivered to the Northeast were unchanged at 43-47 cents/doz. Prices in the Southeast and Midwest were also unchanged at 46-49 cents/doz. and 35-38 cents/doz. Large eggs delivered to California were unchanged at $1.03/doz.

For turkeys, USDA said the market is steady, with mixed undertones. Offerings have been light, while demand has been moderate to good. Prices for hens and toms decreased to $1.16-1.28/lb. and $1.09-1.28/lb., respectively.